Spirit Airlines (SAVE.US) may file for bankruptcy, shares plunge over 33% before market open

U.S. low-cost airline Spirit Airlines (SAVE.US) is reportedly in talks with bondholders over potential bankruptcy filing terms after its merger with Jetblue Airways (JBLU.US) failed, sending Spirit Airlines' shares down more than 33% before the market opened on Friday.

The report, citing people familiar with the matter, said Spirit Airlines is also seeking to restructure its balance sheet through an out-of-court deal, but recent negotiations have focused on reaching agreements with bondholders and other creditors to support its Chapter 11 bankruptcy protection under US bankruptcy law. The people said even if Spirit Airlines files for bankruptcy, it won't happen soon.

Spirit Airlines responded by referring to its second-quarter earnings call, where CEO Ted Christie said he was negotiating with bondholders' advisors to resolve the debt maturing in 2025 and 2026.

"As these negotiations are ongoing, we will not be going into depth on the topic or answering any questions about potential outcomes," Christie said, adding that it was a priority and the company was focused on ensuring "the best outcome for the business as soon as possible."

Jetblue Airways and Spirit Airlines canceled a $3.8 billion merger in March after a US judge blocked the deal in January on antitrust grounds. Spirit Airlines is struggling with losses and revenue declines, and many of its $3.3 billion in debt are maturing. Spirit Airlines has not made a profit in five of the past six quarters, raising questions about its ability to repay its debts.

Spirit Airlines also warned that its losses would widen in the third quarter, mainly due to "intense competition" for price-sensitive leisure travelers and overcapacity in the US domestic market.